Industrial Distributor
Demand-Based Pricing for 8,000 SKUs
The Challenge
A technical components distributor with 8,000+ SKUs had pricing chaos:
- Patchwork of cost-plus, competitor-matching, and forgotten prices
- Sales team had broad discounting authority → margin erosion
- 60% of SKUs sold <50 units/year (sparse data)
- Sales culture resistant to “black box” pricing
The Approach
Developed a hierarchical pricing model that works despite data sparsity:
- Category-level estimation: Shrink SKU estimates toward category priors
- Customer segmentation: Price-sensitive vs. relationship accounts
- WTP signals: Quote-to-order rates, discount request frequency
- Transparent outputs: Confidence intervals + plain-language explanations
The Outcome
After 12 months:
+8% Avg. margin improvement
400+ Underpriced SKUs found
Key Insight
B2B pricing isn’t about finding the “right” price — it’s about giving sales teams defensible anchors.
A model that explains its reasoning gets adopted. A model that just outputs numbers gets ignored.